Govt’s GST Reforms: Are Movie Tickets Likely to Get Cheaper?

Narendra Modi-led government’s upcoming next-generation goods and services tax (GST) reforms are likely to be a relief for theatregoers as movie tickets get cheaper. The taxes on entertainment services like movie theatres, which currently attract 18% GST, are likely to be put in a lower bracket.  

“Entertainment services like movie tickets are currently taxed at 12% and 18%. The proposed reforms with reduced GST rates will be lowering cost of such entertainment for consumers and therefore these reforms are going to impact the entertainment industry positively with increased demand,” Paras Nath, Partner at tax audit firm T R Chadha & Co., told Outlook Business. 

The development might impact the entertainment industry positively with increased demand, provided the reduction in GST rates is completely passed on to the consumers, according to experts.

“I also feel that the government shall take measures to ensure that the reduction in GST rates is fully passed on to the consumers,” Nath explained.

Under the present GST regime, there are four tax slabs, including 5, 12, 18 and 28%. The centre's potential move to introduce a two-tier GST structure of 5 and 18% along with a 40% special slab for luxury and sin goods. The government’s proposed move aims to shift 99% of the goods in the current 12% slab to 5% and 90% of the goods and services in the 28% slab to the 18% bracket. 

Presently, movie tickets costing ₹100 and less attract 12% GST, and those above ₹100 are taxed at 18%. The 12% rate may be reduced to 5% to increase the footfalls in the theatres, the experts projected.

Additionally, the supply of food and beverages inside movie theatres is not part of cinema exhibition services and attracts 5% GST. Food and beverages form a significant part of the overall cinema-going experience. Any increase in footfalls at theatres is likely to have a positive impact on the F&B segment. 

“Most of the movie goers do not visit theatre only for watching movies, but also to experience the ambience and varied types of food/cuisines that are being offered while watching movies,” Rahul Shekhar, Partner, Indirect Tax, Nangia Andersen India, told Outlook Business. The proposed reduction in GST levied on services, including cinema tickets, is likely to increase footfalls in the cinema halls and would benefit the F&B operators as well, Shekhar added.